Dr Pepper saw decline in income but sales increased in Q1

US soft drinks company Dr Pepper Snapple reported a $27m, or 9%, decline in income from operations and an $18m decline in net income in the first quarter (Q1) of 2018 compared with Q1 2017.

The downturn was primarily a result of the company experiencing $28m of growth in Q1 2017 from its acquisition of Bai brands and an increase in selling, general and administrative expenses in Q1 2018.

However, net sales increased by approximately 6% from $1.51bn in Q1 2017 to $1.59bn in 2018. The company attributes sales growth to a roughly 2.5% increase in sales volume and the Easter holiday falling in the first quarter in 2018, compared with the second quarter in 2017, as well as favourable product and package mix, segment mix and foreign currency translation.

Net sales increased across Dr Pepper Snapple’s three product segments, but packaged beverages led the way with an increase of $60m to $1.8bn in the first quarter of 2018.
Sales of beverage concentrates grew by $9m to $303m and sales of Latin American beverages rose by $15m to $113m.

The sales growth for packaged beverages was attributed to higher sales volumes, favourable product and package mix and an increase in contract manufacturing. The sector experienced some sales decline because the company lost distribution rights to drinks brand Rockstar in 2017.

The sub-segment of packaged beverages that grew the most in terms of sales was non-carbonated beverages (NCBs). Sales increased by 7% because the Easter holidays were in Q1 rather than Q2.

The company’s allied brands grew by 32% due to distribution gains for Core and Bodyarmor, Bai increased 54% because of distribution gains, product innovation and promotional activity, as well as having one more month of shipments in Q1 2018 compared with Q1 2017. Snapple increased 3%, Clamato and Mott’s both increased 5%. Other NCB brands declined by 2%; led by Arizona.

The other sub-segment of packaged beverages, carbonated soft drinks, saw 2% growth led by Canada Dry with 16% growth. Dr Pepper experienced 1% growth; it saw strong sales of regular and diet, but a reduction in sales of its TEN product. 7UP’s sales declined by 3%.

Latin American beverages’ $15m sales growth was the result of a favourable foreign currency translation of $7m, higher pricing and favourable product and package mix. The segment’s sales volumes were flat: Peñafiel grew by 2%, which was fully offset by a 2% decline for Clamato.

The $9m net sales increase for the beverage concentrates sector was attributed to higher pricing, favourable product mix and a 1% increase in case sales. Sales volumes rose by 2% led by Canada Dry, which experienced an 8% increased due to continued growth in the ginger ale category and product innovation. Schweppes also benefitted from the popularity of ginger ale; it saw 1% growth.

Dr Pepper grew by 1% including some declines in the sales of TEN and diet varieties. 7UP and A&W declined 3% and 1% respectively.